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FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-21423
PROSPECTUS
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172,000 SHARES
ACCESS HEALTH, INC.
COMMON STOCK
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All of the shares of Common Stock offered hereby are being sold by the Selling
Stockholders named herein under "Selling Stockholders." Such shares are being
offered on a continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended. No underwriting discounts, commissions or expenses are
payable or applicable in connection with the sale of such shares. The Common
Stock of Access Health, Inc. (the "Company") is quoted on the National
Association of Securities Dealers' Automated Quotation System ("Nasdaq")
National Market System ("NMS") under the symbol "ACCS." The shares of Common
Stock offered hereby will be sold from time to time at then prevailing market
prices, at prices relating to prevailing market prices or at negotiated prices.
On February 24, 1997, the closing price of the Common Stock on The Nasdaq NMS
was $27.75.
The shares of Common Stock offered hereby were issued by the Company in
connection with its acquisition of Clinical Reference Systems, Ltd. ("CRS").
The shares of Common Stock offered hereby represent less than one percent of the
Company's currently outstanding Common Stock.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" COMMENCING ON PAGE 4 HEREOF FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS FEBRUARY 24, 1997.
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AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form S-3
(referred to herein, together with all amendments and exhibits, as the
"Registration Statement") under the Securities Act, with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract or other
documents referred to or incorporated by reference herein are not necessarily
complete and, in each instance in which a copy of such contract or document is
filed as an exhibit to the Registration Statement or another document filed by
the Company with the Commission, reference is made to such copy and each such
statement shall be deemed qualified in all respects by such reference. Copies
of the Registration Statement may be inspected, without charge, at the offices
of the Commission, or obtained at prescribed rates from the Public Reference
Section of the Commission at the address set forth below.
The Company is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copies at the public
reference facilities of the Commission located at Room 1024, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549 and at the Commission's regional
offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also can be obtained from the Public
Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington D.C. 20549, at prescribed rates. The Commission maintains a World
Wide Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the site is http://www.sec.gov. The Company's Common Stock is
quoted for trading on the Nasdaq National Market and reports, proxy statements
and other information concerning the Company may be inspected at the offices of
the National Association of Securities Dealers, Inc., 9513 Key West Avenue,
Rockville, Maryland 20850.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS AND ANY INFORMATION OR REPRESENTATION NOT CONTAINED OR
INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY SELLING STOCKHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN ANY
JURISDICTION IN WHICH IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS AT ANY TIME NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated herein by
reference:
1. The Company's Current Report on Form 8-K dated February 6, 1997 and filed
with the Commission on February 7, 1997.
2. The Company's Current Report on Form 8-K/A dated November 18, 1996 and
filed with the Commission on January 31, 1997.
3. The Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1996.
4. The Company's Current Report on Form 8-K dated November 18,
1996 filed with the Commission on November 26, 1996.
5. The Company's Definitive Proxy Statement pursuant to Schedule
14A filed with the Commission on October 18, 1996.
6. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the
Commission on December 24, 1991.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment which indicates that all securities registered have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference in this prospectus and the Registration Statement of
which this prospectus is a part and to be part hereof from the date of filing of
such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document that also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus. The Company
will provide, without charge to each person to whom this Prospectus is
delivered, upon written or oral request of such person, a copy of any and all of
the information that has been or may be incorporated by reference in this
Prospectus, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Such requests
should be directed to the Investor Relations Department, Access Health, Inc.,
11020 White Rock Road, Rancho Cordova, California 95670, telephone (916) 851-
4000.
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This Prospectus contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" and elsewhere in this
Prospectus.
THE COMPANY
The Company was incorporated in California in October 1987 as Referral
Systems Group, Inc., adopted the name Access Health Marketing, Inc. in July
1990, reincorporated in Delaware in January 1992 and changed its name to Access
Health, Inc., in March 1995. The Company's headquarters are located at 11020
White Rock Road, Rancho Cordova, California 95670, and its telephone number is
(916) 851-4000.
During November 1996, the Company entered into business combinations
with Informed Access Systems, Inc. and Clinical Reference Systems, Ltd. The
business combinations have been accounted for as poolings of interests and the
historical consolidated financial statements of the Company for years prior to
the business combinations have been restated in the supplemental consolidated
financial statements to include the financial statements of Informed Access,
Inc. and Clinical Reference Systems, Ltd.
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a
high degree of risk. Prospective investors should carefully consider the
following risk factors, in addition to other information contained in this
Prospectus, in evaluating an investment in the shares offered hereby. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus.
Fluctuations in Financial Results. During fiscal 1994 and 1995 Access
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Health incurred significant expenses related to the start-up of its PHA and
FirstHelp products, including the hiring and training of personnel and the
expansion of its operational infrastructure and sales and marketing programs.
Because revenues from PHA and FirstHelp were not sufficient to cover these
start-up expenses, operating losses were sustained in fiscal 1994 and 1995.
Access Health returned to profitability in 1996 as additional members have
been enrolled in PHA and FirstHelp. There is no assurance, however, that the
Company will be able to sustain profitability or that additional members will
continue to enroll in PHA and/or FirstHelp.
Ability to Secure Additional Contracts and Expand and Retain Existing
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Contracts. Access Health's ability to sustain and grow its business and improve
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its results of operations is largely dependent on its continuing ability to
secure contracts with new customers and to retain and expand contracts with
existing customers. After an initial term of approximately one to four years,
contracts generally can be terminated upon 60 to 180 days notice to Access
Health. In addition, Access Health's customer contracts periodically come up
for renewal and may also be renegotiated. For example, in June 1995 Access
Health renegotiated a PHA contract with an existing customer which reduced the
minimum number of enrolled members required under the contract, and renegotiated
two contracts for two other clients for health systems services. One of Access
Health's three largest contracts is up for renewal in fiscal 1997, and two are
up for renewal in fiscal 1998. In addition, Access Health's success in securing
new contracts and retaining existing contracts may be adversely affected by
factors outside of Access Health's control, such as government regulatory action
or adverse publicity. For example, certain of Access Health's contracts could
be subject to early termination by its customers if Access Health were not in
compliance with any applicable government regulation.
Dependence on Principal Contracts. A significant portion of Access
---------------------------------
Health's revenues are generated by a limited number of customers. For example,
Access Health's three largest customers accounted for approximately 14.5%, 10.3%
and 10.0% of its total revenues for the year ended September 30, 1996. These
contracts are periodically up for renewal and renegotiation and may be subject
to early termination in certain circumstances. The
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termination, non-renewal or renegotiation of any of such agreements could have a
material adverse effect on Access Health's business, results of operation and
financial condition.
Volatility of Access Health Stock Price. The market for Access
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Health's Common Stock is highly volatile. The trading price of Access Health's
Common Stock is subject to wide fluctuations in response to a variety of
factors, including: (i) quarterly variations in operating and financial results;
(ii) the signing or loss of a major contract; (iii) announcements of new
products or service offerings by Access Health or its competitors; (iv) changes
in prices of Access Health's or its competitors' products and services; (v)
changes in the revenue and operating income growth rates for Access Health; (vi)
changes in governmental regulation; and (vii) general conditions in the health
care industry and the economy, as well as other events or factors. Statements
or changes in opinions, ratings or earnings estimates made by brokerage firms or
industry analysts relating to the market in which Access Health does business or
relating to Access Health specifically have resulted, and could in the future
result, in an immediate and adverse effect on the market price of Access
Health's Common Stock. Statements by financial or industry analysts regarding
the extent of the dilution in Access Health's net income per share resulting
from the Merger with CRS or the recent merger with Informed Access and the
extent to which and timing when such analysts expect potential operational
efficiencies to offset such dilution can be expected to contribute to volatility
in the market price of Access Health Common Stock. In addition, the stock
market has from time to time experienced extreme price and volume fluctuations
which have particularly affected the market price for the securities of many
health care companies and which often have been unrelated to the operating
performance of these companies. These broad market fluctuations may adversely
affect the market price of Access Health Common Stock.
Competition. The market for Access Health's products and services is
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highly competitive. There are a number of competitors that offer products or
services that compete with some or all of those offered by Access Health.
Existing and potential clients may also evaluate Access Health's products or
services against the cost of internally developed programs. Increased
competition could result in pricing pressure and margin erosion. In its
existing business and as Access Health offers new products or services, or
enters new markets, it may face increased competition from competitors, some of
which may have substantially greater financial, marketing and technical
resources than Access Health. There can be no assurance that Access Health will
continue to compete successfully with its existing competitors or will be able
to compete successfully with new competitors.
Product Development. The health care industry has undergone
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significant changes in recent years, and changes are expected to continue.
Containing health care costs has become a national priority in the United
States. As a result, the health care industry has become increasingly dominated
by managed health care plans, causing cost containment pressure to rise. Access
Health's personal health management products and services and recently acquired
health care coordination products and services were developed in response to
industry demand for products which could help contain health care costs.
Continued change in the health care industry and pressure to continually upgrade
and enhance its products and services may cause Access Health to incur
significant product development expenses. Access Health will need to upgrade
and enhance its products and services on a continual basis in order to remain
competitive. For example, Access Health will need to add protocols and clinical
algorithms to its products on an ongoing basis in order to provide its customers
with current clinical information, new modules and advanced features. In
addition, Access Health may also be required to do additional development work
to permit the implementation of its products with increasingly larger customer
bases. As part of this ongoing development basis, Access Health may conduct
large scale upgrades which have a significant impact on its products. There can
be no assurance that continued industry change will not adversely affect Access
Health's ability to compete or that Access Health will be able to complete its
product development efforts in a timely and efficient manner or that the Access
Health products and services will achieve ongoing market acceptance.
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Government Regulation. The health care industry is subject to
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extensive and evolving government regulation at both the federal and state level
relating to many aspects of Access Health's and its clients' businesses in use
of Access Health's programs, including the provision of health care services,
teleservicing, health care referral programs, and health maintenance
organizations and other similar plans. These statutes and regulations in many
cases predate the development of telephone-based health care information
services and other interstate transmission and communication of medical
information and services. The literal language of certain of these statutes and
regulations governing the provision of health care services, including the
practice of nursing and the practice of medicine, could be construed by
regulatory authorities to apply to certain of Access Health's activities,
including without limitation, teleservicing activities which use Arizona,
California, Colorado and Illinois registered nurses to provide out-of-state
personal health care management services such as nursing assessment and
counseling and information regarding appropriate health care providers and
treatment time frames. These statutes and regulations could also apply to
certain activities of Access Health's health care service customers when
operating Access Health's programs. Access Health has not been made, nor is it
aware that any of its clients with respect to operation of Access Health's
programs, or its nurse employees or any other organization providing out-of-
state teleservicing have ever been made, the subject of such requirements by a
regulatory authority. In addition, the literal language of the statutes and
regulations governing health maintenance organizations and other plans that
provide or arrange for the provision of health care services for a prepaid or
periodic charge could be construed by regulatory authorities to apply to certain
activities of Access Health that are provided on a per-member, per-month basis.
Access Health has not been made, nor is it aware that any other company
providing teleservicing has ever been made, the subject of such requirements by
a regulatory authority. However, if regulators seek to enforce any of the
foregoing statutory and regulatory requirements, Access Health, its employees
and/or its clients could be required to obtain additional licenses or
registrations, to modify or curtail the operation of Access Health's programs,
to modify the method of payment for Access Health's programs, or to pay fines or
incur other penalties.
The payment of remuneration to induce the referral of health care
business has been the subject of increasing governmental and regulatory focus in
recent years, including the federal anti-kickback statute, which provides
criminal and civil penalties for individuals or entities that knowingly and
willfully offer, pay, solicit or receive remuneration in order to induce
referrals for items or services for which payment may be made under the Medicare
and Medicaid programs and certain other government-funded programs. A number of
states in which Access Health operates have anti-kickback statutes similar to
the federal statute which may apply to government and non-government payment
programs as well as statutory and regulatory requirements governing referral
agencies and regulating franchising and business opportunity ventures. In
addition, the federal government and a number of states have enacted statutes
which contain outright prohibitions on referrals for specified services which
are made by referring providers who have an ownership interest in, or
compensation arrangement with, the entity to which the referral is made. If
Access Health or the use of its products and services were to be found in
violation of any of the foregoing statutes or regulations, Access Health or its
clients could be required to modify or curtail the operation of Access Health's
programs, or to pay fines or incur other penalties, and Access Health's clients
could be excluded from participation in the Medicare and Medicaid programs and
could be precluded from charging fees and obtaining reimbursement for specified
services.
There can be no assurance that Access Health or the use of its
products and services will not be subject to review or challenge by government
regulators under any of the foregoing statutes and regulations that apply to
health care services and products. In addition, additional laws and regulations
could be enacted in the future that would regulate Access Health or the use of
its products and services. Any government investigative or enforcement actions
with respect to Access Health or the use of its products or services could
generate adverse publicity irrespective of the final outcome, and could have a
material adverse effect on Access Health.
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Management of Growth. Access Health has experienced rapid growth in
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recent years. Continued rapid growth may place a significant strain on Access
Health's management, telecommunications systems, operational infrastructure,
working capital and financial and management control systems. In order for
Access Health to manage its client base successfully, management will be
required to anticipate the changing demands of their growing operations and to
adopt systems and procedures accordingly. Failure to effectively implement or
maintain such systems and controls could adversely affect Access Health's
business, results of operation and financial condition. Further, there can be
no assurance that Access Health's current information systems,
telecommunications systems and operational infrastructure will be adequate for
its future needs, or that Access Health will be successful in implementing new
systems. Failure to upgrade its information systems, telecommunications systems
and operational infrastructure or unexpected difficulties encountered with these
systems during expansion could adversely affect Access Health's business,
financial condition and results of operations.
Acquisition-Related Risks. The Company has grown in substantial part
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through mergers and acquisitions. The process of integrating an acquired
company's business into the Company's operations may result in unforeseen
operating difficulties and expenditures and may absorb significant management
attention that would otherwise be available for the ongoing development of the
Company's business. Moreover, there can be no assurance that the anticipated
benefits of an acquisition will be realized. Future acquisitions by the Company
could result in potentially dilutive issuances of equity securities, the
incurrence of debt and contingent liabilities and amortization expenses related
to goodwill and other intangible assets, which could materially adversely affect
the Company's operating results and financial condition. In addition,
acquisitions involve numerous risks, including difficulties in the assimilation
of the operations, technologies and products of the acquired companies,
difficulties in managing diverse geographic operations, the diversion of
management's attention from other business concerns, risks of entering markets
in which the Company has no or limited direct prior experience and the potential
loss of key employees of the acquired company. The inability of the Company's
management to respond to changing business conditions effectively, including the
changes associated with its acquired businesses and product lines, could have a
material adverse effect on the Company's results of operations. From time to
time, the Company evaluates potential acquisitions of businesses, products or
technologies. However, the Company has no present understandings, commitments
or agreements with respect to any material acquisition of other businesses,
products or technologies, and no material acquisition is currently being pursued
actively. In the event that such an acquisition were to occur, however, there
can be no assurance that the Company's business, operating results and financial
condition would not be materially adversely affected.
Uncertainties Relating to Integration of Operations. Access Health
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has entered into Reorganization Agreements with Clinical Reference Systems, Ltd.
("CRS") and Informed Access Systems, Inc. ("Informed Access") with the
expectations that the mergers will result in beneficial synergies for the
combined companies. Achieving the anticipated benefits of the mergers will
depend in part upon whether the integration of the two companies' businesses
with Access Health is achieved in an efficient, effective and timely manner, and
there can be no assurance that this will occur. The successful combination of
the two companies with Access Health will require, among other things, the
timely integration of the companies' respective product and service offerings,
coordination of their respective sales and marketing and research and
development efforts and integration of the companies' respective
telecommunications systems with Access Health. The difficulties of such
integration may be increased by the necessity of coordinating geographically
separated organizations. There can be no assurance that integration will be
accomplished smoothly, on time or successfully. Integrating the operations of
the two companies with Access Health could have a material adverse effect on
Access Health's business. For example, the process could (i) interrupt Access
Health's business, (ii) divert management attention, (iii) place further
pressure on Access Health's officers; and (iv) result in additional
administrative expense. Failure to effectively accomplish the integration of
the two companies' operations with Access Health could have a material adverse
effect on Access Health's business, results of operations and financial
condition.
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Future Acquisitions. Access Health intends to evaluate future
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acquisitions of complementary product lines and businesses as part of its
business strategy. Future acquisitions by Access Health may result in
potentially dilutive issuances of equity securities, the use of Access Health's
cash resources, the incurrence of additional debt and increased goodwill,
intangible assets and amortization expense which could negatively impact Access
Health's profitability. In addition, acquisitions involve numerous risks,
including difficulties in the assimilation of the operations and products of the
acquired companies, the diversion of management's attention from other business
concerns, risks of entering markets in which Access Health has no or limited
direct prior experience, and the potential loss of key employees of the acquired
company.
Key Personnel. Access Health's success depends in part on the
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continued contributions of its key management and technical personnel. While
Access Health key employees do not generally enter into employment or
noncompetition agreements, certain key employees of Informed Access and CRS have
entered into noncompetition agreements and employment agreements in connection
with the mergers. The loss of the services of one or more of these employees
could have a material adverse affect on Access Health. The success of Access
Health also depends on Access Health's ability to attract and retain other
qualified technical, managerial, sales and marketing personnel. The competition
for such personnel is intense in the health care industry. Uncertainty during
integration of the companies' businesses may adversely affect the combined
companies' ability to attract and retain such personnel.
Risk Management. In recent years, participants in the health care
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industry, including physicians, nurses and other health care professionals, have
been subject to an increasing number of lawsuits alleging malpractice, product
liability and related legal theories, many of which involve large claims and
significant defense costs. Due to the nature of its business, Access Health
could become involved in litigation regarding the telephone information given by
its registered nurses or those of its licensees with the risk of adverse
publicity, significant defense costs and substantial damage awards. Access
Health has not adopted policies and procedures intended to reduce the risk of
claims and, to date, Access Health has not been the subject of any claim
involving either clinical assessment systems, the operation of teleservicing
centers or the operation by hospital clients of on-site call centers. However,
there can be no assurance that claims will not be brought against Access Health.
Even if such claims ultimately prove to be without merit, defending against them
can be time consuming and expensive, and any adverse publicity associated with
such claims could have a material adverse effect on Access Health's business,
results of operations and financial condition.
While Access Health maintains professional liability insurance, there
can be no assurance that claims in excess of Access Health's insurance coverage
will not arise or that all claims would be covered by such insurance. In
addition, although Access Health has not experienced difficulty in obtaining
insurance coverage in the past, Access Health expects to seek increased
insurance coverage as its business grows. There can be no assurance that Access
Health will be able to maintain existing insurance coverage or obtain increased
coverage on acceptable terms or at all.
Risks Associated with Call Center Operations. Access Health maintains
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member service and data centers ("call centers") in Rancho Cordova, California;
Chicago, Illinois; Phoenix, Arizona and Broomfield, Colorado (as of the
Effective Time). Access Health's operations depend on the adequate functioning
of the computer and telephone systems in its call centers. Although Access
Health has taken precautions to provide for power, computer and telephone
systems redundancy, there can be no assurance that a fire or other disaster
affecting the centers or an equipment failure would not disable Access Health's
systems for a significant period of time. Any significant damage to Access
Health's facilities or an equipment failure could have a material adverse effect
on Access Health's results of operations. Access Health's current
telecommunications infrastructure will not be adequate for its future needs and
Access Health will need to continue to expand such infrastructure to support its
continued revenue growth. See "--Uncertainties Relating to Integration of
Operations" and "--Management of Growth."
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Limitations on Protection of Proprietary Rights. Access Health
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regards its software, clinical nursing assessment protocols and marketing and
program operation materials as proprietary and attempts to protect its
intellectual property with copyrights, trademarks, trade secret laws and
restrictions on disclosure, copying and transferring title. Access Health has
no patents. Informed Access holds one issued United States patent which covers
a number of inventions, including the structure, use and process of its clinical
decision architecture ("CDA") and clinical database and certain capabilities of
the provider profiler product. There can be no assurance that competitors, some
of which have substantial resources and have made substantial investments in
competing technologies, will not seek to apply for and obtain patents that will
prevent, limit or interfere with Access Health's ability to make, use or sell
its products either in the United States or in international markets.
Furthermore, the laws of certain foreign countries do not protect Access
Health's intellectual property rights to the same extent as do the laws of the
United States. Litigation or regulatory proceedings, which could result in
substantial cost and uncertainty to Access Health, may also be necessary to
enforce Access Health's intellectual property rights or to determine the scope
and validity of other parties' proprietary rights. It is also possible that
Access Health may need to acquire licenses to, or contest the validity of,
issued or pending patents of third parties relating to Access Health's
technology. There can be no assurance that any of such licenses would be made
available to Access Health on acceptable terms, if at all, or that Access
Health, if it were to contest the validity of any issued or pending patents,
would prevail. In addition, Access Health could incur substantial costs in
defending itself in suits brought against Access Health on its patents or in
bringing suits against third parties to enforce Access Health's proprietary
rights including patents. Access Health also relies on copyright, trademarks,
trade secret laws and restrictions on disclosure, copying and transferring
title. Despite Access Health's precautions, it may be possible for unauthorized
third parties to copy aspects of Access Health's products or to obtain and use
information that Access Health regards as proprietary. Existing copyright laws
afford only limited practical protection. In addition, the laws of some foreign
countries do not protect Access Health's proprietary rights to the same extent
as do the laws of the United States, which could be a factor if Access Health
expands into markets outside the United States.
Possible Adverse Tax Impact of Offering. The Shareholder's
---------------------------------------
Representation Statement and Registration Rights Agreement among the Company and
certain stockholders of the Company dated November 25, 1996, including the
Selling Stockholders, requires the Company to include in this offering all of
the shares issued to the former shareholders of CRS at the time of the merger
with CRS (the "Merger Shares"). If such Selling Stockholders sell more than 50%
of the Merger Shares in this offering (or otherwise within two years of November
25, 1996, the date of the merger with CRS), the Internal Revenue Service ("IRS")
may argue that the continuity of interest" requirement for the merger with CRS
was not satisfied and therefore the merger with CRS was not a tax-free
reorganization for the Selling Stockholders, CRS and the Company. "Continuity
of Interest" requires a continuity of interest in the reorganized corporation on
the part of those persons who were the owners of the enterprise prior to the
reorganization. This is satisfied if the shareholders of CRS did not have a
plan or intent existing at the time of the merger with CRS to dispose of or
transfer the Merger Shares such that they, as a group, would no longer have a
significant equity interest in the Company after the merger with CRS. Certain
of the Selling Stockholders have agreed that they will not sell 50% or more of
their Merger Shares within 18 months after the date of the merger with CRS. If
the IRS is successful in asserting that the Merger does not qualify as a tax-
free reorganization, the Company would be required to recognize a significant
gain with respect to the CRS assets. This would increase the Company's tax
liability and, therefore, its cash flow and net income would be reduced,
potentially by a substantial amount. The percentage of Merger Shares sold and
the timing of the sales are only two of several factors considered in the
"continuity of interest" test, but these factors could form the basis of an IRS
challenge.
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SELLING STOCKHOLDERS
Each Selling Stockholder, except Thomas E. Gardner (the "Additional
Selling Stockholder"), acquired the shares of Common Stock offered hereby in
connection with the Company's acquisition of CRS, in which such Selling
Stockholders exchanged their CRS securities for Common Stock of the Company.
Except as described below, no Selling Stockholder has had any position, office
or other material relationship with the Company within the past three years.
EMPLOYMENT AND CONSULTING AGREEMENTS
Richard Thompson, President and Chief Executive Officer of CRS,
entered into an employment agreement with Access Health. Pursuant to the
employment agreement, Richard Thompson has been paid $93,000 on an annualized
basis since the effective date of the merger of CRS with and into Access Health
(the "CRS Merger") through December 31, 1996, and he is to be paid $100,000
annually, effective January 1, 1997 for the period of three years following the
effective date of the CRS Merger. In addition, Mr. Thompson has been granted
stock options to purchase 20,000 shares of Common Stock of Access Health, which
vests 20% at the end of each 12 month period following the effective date of CRS
Merger, and he is entitled to certain other employee benefits during the term of
his employment, such as participation in the Company Management Incentive Plan,
pension plans, incentive stock option plans and insurance plans, among others.
In addition, Mr. Thompson is also guaranteed certain severance benefits if he is
terminated by Access Health or CRS, other than for cause. As part of Mr.
Thompson's employment agreement with Access Health he has agreed to comply fully
with Access Health's policies relating to non-disclosure of Access Health's
trade secrets and proprietary information as delineated in Access Health's
Confidentiality Agreement.
Robert B. Bruegel, a director and principal shareholder of CRS,
entered into a consulting agreement with CRS. Pursuant to the consulting
agreement with CRS, Mr. Bruegel is to be retained for the period of December 1,
1996 to May 31, 1997. In addition, Mr. Bruegel has agreed to fully comply with
CRS' policies relating to non-disclosure of CRS' trade secrets and proprietary
information as delineated in CRS' Confidentiality Agreement. Mr. Bruegel has
also entered into a non-competition agreement with the Company. No other
officer, director or principal stockholder of Access Health or CRS has any
material interest in the Merger, other than an interest arising solely from
ownership of securities of Access Health or CRS.
ESCROW AGREEMENT
Escrow. Pursuant to that certain Agreement and Plan of Reorganization
------
dated September 5, 1996 (the "Reorganization Agreement") by and among Access
Health, CRS, Access Health Colorado, Inc. and the escrow agent, 17,000 Access
Health shares of Common Stock (the "General Escrow Amount") have been deposited
with an escrow agent by the Selling Stockholders. In addition, 8,500 Access
Health shares of Common Stock (the "Schedule 2.15 Escrow Amount") have been
deposited with the escrow agent to cover potential damages that may arise from
certain claims that may be brought by a former employee of CRS against certain
persons to be indemnified by the Selling Stockholders pursuant to the
Indemnification Agreement described below (the "Schedule 2.15 Claims").
Together the General Escrow Amount and the Schedule 2.15 Escrow Amount
constitute the entire escrow fund (the "Escrow Fund").
Availability of Escrow for Breaches of Representations and Warranties.
---------------------------------------------------------------------
The General Escrow Amount is available (and in the absence of fraud is the sole
remedy) to compensate Access Health and its affiliates for any losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses, and expenses of investigation and defense, to the
extent they are incurred directly or indirectly as a result of any inaccuracy or
breach by CRS of any representation or warranty, or any failure by CRS to
perform or comply with any covenant contained in the Reorganization Agreement
(the "Indemnifiable Losses"). The General Escrow Amount shall be
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<PAGE>
distributed to the former CRS shareholders upon the earlier to occur of (i) one
year following the Closing Date or (ii) the issuance of Access Health's audited
financial statements for the year ending September 30, 1997.
Availability of Escrow for Schedule 2.15 Claims. The Schedule 2.15
-----------------------------------------------
Escrow Amount and the General Escrow Amount are both available to compensate
certain indemnified persons from any damages that may arise from Schedule 2.15
Claims; however, the Schedule 2.15 Escrow Amount and the General Escrow Amount
are not the exclusive means of indemnification for damages that may arise from
---
Schedule 2.15 Claims. Rather, it was a condition to consummation of the merger
with CRS that each shareholder of CRS (other than shareholders exercising
dissenters' rights) execute the Indemnification Agreement described below, and
agree to indemnify Access Health and certain other persons from any damages with
respect to any Schedule 2.15 Claim. The Schedule 2.15 Escrow Amount shall be
distributed to the former CRS shareholders 90 days following the Effective Time
of the merger with CRS unless a legal proceeding with respect to the Schedule
2.15 Claims is brought prior to the expiration of such 90 day period, in which
event the distribution will occur on the earlier of (i) the resolution of such
legal proceeding or (ii) counsel's delivery of a legal opinion satisfactory to
Access Health stating that the legal proceeding is without merit.
The Escrow Fund shall terminate upon the distribution of the General
Escrow Amount and the Schedule 2.15 Escrow Amount.
The following table sets forth certain information known to the
Company with respect to the beneficial ownership of the Company's Common Stock
as of September 1, 1996 by each Selling Stockholder named below (without regard
to shares sold by such persons pursuant to this Prospectus). The following
table assumes (i) all shares of Access Health Common Stock currently held in the
Escrow Fund will be distributed in their entirety to the Selling Stockholders
and (ii) each Selling Stockholder sells all of the shares offered hereby. The
Company is unable to determine the exact number of shares that will actually be
sold.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED PRIOR TO OFFERING
------------------------------------------- SHARES BEING SHARES BENEFICIALLY OWNED
SELLING STOCKHOLDERS NUMBER PERCENT OFFERED AFTER OFFERING
- -------------------- ------ ------- ------------ -------------------------
<S> <C> <C> <C> <C>
Robert Bruegel 57,582 * 57,582 0
Janice Burley 8,228 * 8,228 0
Greg Curtiss 10,098 * 10,098 0
Raymond D. Gardner 10,897 * 10,897 0
Ellen D. Graves 8,228 * 8,228 0
Derek Henrickson 3,910 * 3,910 0
Michael Mackin 1,309 * 1,309 0
Michael Smith 1,462 * 1,462 0
Sandhill Trust 26,350 * 26,350 0
Salvatore Salame 1,615 * 1,615 0
Richard Thompson 36,193 * 36,193 0
E. Berniker 984 * 984 0
Richard Richards 1,491 * 1,491 0
Ann Richard 1,652 * 1,652 0
Total 170,000 * 170,000 0
</TABLE>
- -----------------
* Less than 1%.
ADDITIONAL SELLING STOCKHOLDER
The Additional Selling Stockholder is Thomas E. Gardner, the
President, Chief Executive Officer and a director of the Company. As of the
date of this Prospectus, Mr. Gardner beneficially owns 2,000 shares of the
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<PAGE>
Company's Common Stock, which is significantly less than 1% of the outstanding
Common Stock of the Company. Mr. Gardner may sell 2,000 shares of Common Stock
pursuant to this Prospectus.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED PRIOR TO OFFERING SHARES BEING SHARES BENEFICIALLY OWNED
ADDITIONAL SELLING STOCKHOLDER NUMBER PERCENT OFFERED AFTER OFFERING
- ------------------------------ ------ ------- ------------ -------------------------
<S> <C> <C> <C> <C>
Thomas E. Gardner 2,000 * 2,000 0
</TABLE>
- ----------------
* Less than 1%.
EMPLOYMENT AGREEMENT
Thomas E. Gardner, the President, Chief Executive Officer and a
director of the Company, entered into an employment agreement with the Company
on December 1, 1996. Pursuant to the employment agreement, Thomas Gardner is to
be paid an annualized base salary of $300,000 for the period of September 1,
1996 to September 1, 2006. In addition, Mr. Gardner, has been granted options
to purchase 230,000 and 250,000 shares of registered stock of the Company, with
exercise prices of $50.625 per share and $34.625 per share, respectively, and
both of which vest 20% on May 8, 1997 and 20% on each of the first four
anniversaries of that date. Mr. Gardner has also been granted 2,000 shares of
restricted stock of the Company, which shall fully vest with respect to 50% of
the restricted stock on the first anniversary of Mr. Gardner's employment with
the Company, and the remainder shall vest on Mr. Gardner's second anniversary of
employment. In addition, the Company has agreed to pay all of Mr. Gardner's
legal expenses incurred in connection with the employment agreement up to a
maximum of $50,000 to reimburse Mr. Gardner for costs incurred in connection
with moving to California, including selling commissions and costs incurred in
the sale of his New Jersey home, and to pay all tax obligations Mr. Gardner
incurs in connection with the reimbursements and benefits received from the
above, up to a maximum of $35,000. As part of Mr. Gardner's employment
agreement he has entered into a non-competition agreement for a period of 12
months following his termination of employment with the Company.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of
securities by the Selling Stockholders or the Additional Selling Stockholder.
PLAN OF DISTRIBUTION
In connection with the Company's acquisition of CRS, the Company and
certain stockholders of the Company, including the Selling Stockholders, entered
into and approved that certain Shareholder's Representation Statement and
Registration Rights Agreement (the "Registration Rights Agreement"). The
Registration Statement of which this Prospectus forms a part has been filed
pursuant to the Registration Rights Agreement. To the Company's knowledge, no
Selling Stockholder has entered into any agreement, arrangement or understanding
with any particular broker or market maker with respect to the shares offered
hereby, nor does the Company know the identity of the brokers or market makers
which will participate in the offering.
The Company has been advised by the Selling Stockholders and the
Additional Selling Stockholder that they intend to sell all or a portion of the
shares offered hereby from time to time in the Nasdaq National Market and that
sales will be made at prices prevailing in the Nasdaq National Market at the
times of such sales. The Selling Stockholders and the Additional Selling
Stockholder may also make private sales directly or through a broker or brokers,
who may act as agent or as principal. Further, the Selling Stockholders or the
Additional Selling Stockholder may choose to dispose of the shares offered
hereby by gift to a third party or as a donation to a charitable or other
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<PAGE>
non-profit entity. In connection with any sales, the Selling Stockholders and
the Additional Selling Stockholder and any brokers participating in such sales
may be deemed to be underwriters within the meaning of the Securities Act.
Any broker-dealer participating in such transactions as agent may
receive commissions from the Selling Stockholders and/or the Additional Selling
Stockholder (and, if such broker acts as agent for the purchaser of such shares,
from such purchaser). Usual and customary brokerage fees will be paid by the
Selling Stockholders and/or the Additional Selling Stockholder. Broker-dealers
may agree with the Selling Stockholders and/or the Additional Selling
Stockholder to sell a specified number of shares at a stipulated price per
share, and, to the extent such a broker-dealer is unable to do so acting as
agent for the Selling Stockholders and/or the Additional Selling Stockholder, to
purchase as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to the Selling Stockholder and to the Additional
Selling Stockholder. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
shares commissions computed as described above. The Selling Stockholders' and
the Additional Selling Stockholder's shares of Common Stock covered hereby may
be offered and sold from time to time by the Selling Stockholders and the
Additional Selling Stockholder. The Selling Stockholders and the Additional
Selling Stockholder will act independently of the Company in making decisions
with respect to the timing, manner and size of each sale.
The Company has advised the Selling Stockholders and the Additional
Selling Stockholder that the anti-manipulative Rules 10b-6 and 10b-7 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), may apply to
sales in the market and has informed them of the possible need for delivery of
copies of this Prospectus. The Selling Stockholders and the Additional Selling
Stockholder may indemnify any broker-dealer that participates in transactions
involving the sale of the shares against certain liabilities, including
liabilities arising under the Securities Act. Any commissions paid or any
discounts or concessions allowed to any such broker-dealers, and, if any such
broker-dealers purchase shares as principal, any profits received on the resale
of such shares, may be deemed to be underwriting discounts and commissions under
the Securities Act.
Rule 10b-6 under the Exchange Act prohibits participants in a
distribution from bidding for or purchasing for an account in which the
participant has a beneficial interest, any of the securities that are the
subject of the distribution. Rule l0b-7 under the Exchange Act governs bids and
purchases made to stabilize the price of a security in connection with a
distribution of the security.
Upon the Company's being notified by the Selling Stockholders or the
Additional Selling Stockholder that any material arrangement has been entered
into with a broker-dealer for the sale of shares through a cross or block trade,
a supplemental prospectus will be filed under Rule 424(C) under the Securities
Act, setting forth the name of the participating broker-dealer(s), the number of
shares involved, the price at which such shares were sold by the Selling
Stockholders or the Additional Selling Stockholder, the commissions paid or
discounts or concessions allowed by the Selling Stockholders or the Additional
Selling Stockholder to such broker-dealer(s), and where applicable, that such
broker-dealer(s) did not conduct any investigation to verify the information set
out in this Prospectus.
The Additional Selling Stockholder's securities covered by this
Prospectus are subject to a right of forfeiture held by the Company. Such
securities shall be released from the right of forfeiture over a two-year period
at a rate of 50% per year. Also, the Additional Selling Stockholder has entered
into an agreement with the Company which prohibits the sale of the securities
covered by this Prospectus until the Company publishes the combined financial
results of the Company and Informed Access Systems, Inc. ("Informed Access"),
a wholly-owned subsidiary of the Company, which were filed with the Commission
pursuant to a Form 8-K on February 7, 1997. In addition, the Selling
Stockholders
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<PAGE>
have entered into an agreement with the Company that prohibits the sale of their
respective securities covered by this Prospectus until after the publication of
the first quarterly financial statements of the Company that include at least 30
days of combined financial results of the Company and Clinical Reference
Systems, Ltd. ("CRS"), a wholly-owned subsidiary of the Company, which were
filed with the Commission on February 7, 1997 pursuant to a Form 8-K.
Any securities covered by this Prospectus which qualify for sale
pursuant to Rule 144 under the Act may be sold under that Rule rather than
pursuant to this Prospectus. In general, under Rule 144 as currently in effect,
a person (or persons whose shares are aggregated), including any person who may
be deemed to be an "affiliate" of the Company, is entitled to sell within any
three month period "restricted shares" beneficially owned by him or her in an
amount that does not exceed the greater of (i) 1% of the then outstanding shares
of Common Stock or (ii) the average weekly trading volume in shares of Common
Stock during the four calendar weeks preceding such sale, provided that at least
two years have elapsed since such shares were acquired from the Company or an
affiliate of the Company. Sales are also subject to certain requirements as to
the manner of sale, notice and availability of current public information
regarding the Company. However, a person who has not been an "affiliate" of the
Company at any time within three months prior to the sale is entitled to sell
his or her shares without regard to the volume limitations or other requirements
of Rule 144, provided that at least three years have elapsed since such shares
were acquired from the Company or an affiliate of the Company.
This offering will terminate as to each Selling Stockholder and the
Additional Selling Stockholder on the earlier of November 25, 1998 or the date
on which all shares offered hereby have been sold by the Selling Stockholders or
the Additional Selling Stockholder. There can be no assurance that any of the
Selling Stockholders or the Additional Selling Stockholder will sell any or all
of the shares of Common Stock offered hereby.
SECURITIES TO BE OFFERED
The Shares offered hereby are shares of Common Stock, $.001 par value,
of the Company. Each share of such Common Stock entitles the holder to one vote
on matters submitted to a vote of the stockholders, a pro rata share of such
dividends as may be declared on the Common Stock and a pro rata share of assets
remaining available for distribution to stockholders upon a liquidation of the
Company. Such Common Stock is not convertible and has no preemptive rights.
While the Board of Directors has authority, within certain limitations, to issue
shares of Preferred Stock which would have one or more preferences over the
Common Stock, no Preferred Stock is currently outstanding and the Company has no
present plans to issue any Preferred Stock.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law
(the "DGCL"), Article X of the Company's Restated Certificate of Incorporation
(the "Restated Certificate of Incorporation") eliminates the liability of the
Company's directors to the Company or its stockholders, except for liabilities
related to breach of duty of loyalty, actions not in good faith and certain
other liabilities.
Section 145 of the DGCL provides for indemnification by the Company of
its directors and officers. In addition, Article VI of the Company's Bylaws
requires the Company to indemnify any current or former director of officer to
the fullest extent permitted by the DGCL. In addition, the Company has entered
into indemnity agreements with its directors and executive officers that
obligate the Company to indemnify such directors and executive officers to the
fullest extent permitted by the DGCL. The Company also maintains officers' and
directors' liability insurance, which insures against liabilities that officers
and directors of the Company may incur in such capacities.
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<PAGE>
In addition, pursuant to an Agreement and Plan of Reorganization dated
as of September 5, 1996 (the "Reorganization Agreement") between the Company,
CRS and Access Health Colorado, Inc., a wholly-owned subsidiary of the Company,
(a copy of which is annexed to the Company's Proxy Statement/Prospectus dated
October 19, 1996 which is a part of the Company's Registration Statement on Form
S-4 filed with the Commission (File No. 333-13930)), the Company will cause CRS,
a wholly-owned subsidiary of the Company, to the fullest extent permitted under
applicable law, to indemnify each current or former officer or director of CRS
against and from any losses that are based on, or that arise out of, the fact
that such person is or was an officer or director of CRS. In addition, the
Merger Agreement provides that the Company will use reasonable efforts to assist
in the defense of any matter asserted in any claim, action, suit, proceeding or
investigation against such person where such person is entitled to
indemnification under applicable law.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements and schedule of Access Health,
Inc. appearing in its Annual Report (Form 10-K) for the year ended September
30, 1996, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated elsewhere
herein by reference. The consolidated financial statements of Access Health,
Inc. appearing in its Proxy Statement/Prospectus filed October 18, 1996, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated elsewhere herein by
reference. The supplemental consolidated financial statements of Access
Health, Inc. appearing in its Current Report (Form 8-K) dated February 6,
1997, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated elsewhere
herein by reference which, as to the years 1994 and 1995, are based in part on
the reports of Arthur Andersen LLP, independent auditors, and Ehrhardt Keefe
Steiner & Hottman PC, independent auditors. The financial statements referred
to above are incorporated by reference herein in reliance upon such reports
given upon the authority of such firms as experts in accounting and auditing.
The consolidated financial statements of Informed Access Systems,
Inc. appearing in the Current Report (Form 8-K/A) of Access Health, Inc. dated
November 18, 1996 have been audited by Arthur Andersen LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated elsewhere herein by reference, are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
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<PAGE>
================================================================================
ACCESS HEALTH, INC.
172,000 SHARES OF
COMMON STOCK
------------
PROSPECTUS
------------
================================================================================
